On January 29, it was reported that the US Dollar Index (DXY) plummeted 9.4% in 2025, marking the worst annual performance in eight years. This weak trend continued into 2026, with a further decline of 2.23% year-to-date. Traditionally, a weakening dollar is seen as bullish for alternative assets like Bitcoin, but this cycle has shown a clear divergence, with Bitcoin still oscillating below $90,000, drawing significant market attention.
From a macro perspective, rising US debt, increasing tariff uncertainties, and diminishing yield advantages are continuously undermining the dollar’s attractiveness. US President Trump has publicly supported a “weak dollar” stance multiple times, believing it helps stimulate exports and economic growth, while also pressuring Federal Reserve Chair Powell to cut interest rates as soon as possible. This policy orientation has been interpreted by some investors as indicating further downside potential for the dollar.
Historically, a weakening DXY has often been accompanied by a surge in Bitcoin. In 2017, the dollar index fell below 96, and Bitcoin surged nearly 8 times; during the liquidity easing cycle of 2020, Bitcoin also experienced multiple-fold increases. However, the current environment has not replicated this trajectory. Although Bitcoin found support near $85,000, its upward momentum has been notably limited.
A key divergence lies in capital behavior. Over the past month, long-term holders have sold approximately 143,000 Bitcoins, the fastest pace in four months, indicating that core funds have not increased their holdings due to dollar weakness. Meanwhile, the Federal Reserve, in its latest FOMC meeting, maintained a “data-driven” approach, kept interest rates unchanged, and emphasized policy independence, which also dampened market expectations for rapid easing.
Analysts point out that if the US, as the world’s largest importer, adopts a long-term weak dollar policy, it could trigger higher inflation risks. This would limit room for rate cuts and suppress the performance of risk assets. In this uncertain environment, some funds are shifting toward more stable asset allocations, making it temporarily difficult for Bitcoin to reproduce the classic scenario of “dollar decline, crypto price surge.”
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